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2020 (6) TMI 171 - AT - Income TaxDeduction u/s 80P(2) - carry forward loss - Addition towards interest earned, assessed as income from other sources - HELD THAT - We find from the statement of facts submitted by the assessee before the CIT(A) that the assessee is obtaining loan from Government for attaining the objects. The assessee keeps the fund in the manner of fixed deposit till the distribution of the said funds to the eligible recipients. However, it is not clear from the orders of the authorities below that how much amount was kept as surplus fund and how much amount has been kept for the distribution to the eligible recipients and which has not been distributed till the date and kept as fixed deposit out of loan funds. Therefore, this matter is sent back to the file of AO to determine as to whether the assessee had actual surplus funds which has been made as fixed deposit. The AO is also directed to examine the source of fixed deposit. If it is found that the fixed deposit has not been made from surplus funds or it has been made from the own funds which were kept for marketing assistance not immediately disposable in the form of marketing assistance to craftsmen and are also not available for otherwise use by the assessee, the AO is directed to give the benefit of deduction u/s.80P(2)(d) to the assessee. Needless to say, the assessee shall be given reasonable opportunity of hearing - Decided in favour of assessee for statistical purposes. Disallowance of ESI EPF contributions - assessee has not deposited the contribution of EPF and ESI within the due date - HELD THAT - We found substance in the submissions of the ld. DR that Section 36(1)(va) of the Act deals with the deduction in respect of the sum received by the assessee from any of his employees to which the provisions of sub-section 2(24)(x) of the Act applies, provided such sum is credited by the assessee to the employee s account in relevant fund on or before the due date. The due date is defined under the Explanation to section 36(1)(va) of the Act by stating that the due date referred under the relevant Act and certainly not the due date for filing the return. This very similar issue has also been decided in the case of Milind Gupta 2019 (10) TMI 128 - ITAT CUTTACK wherein the Tribunal has restored the issue to the file of AO to examine the contributions made with reference to the dates when they were actually made and grant relief to such of claim which qualified for such relief in terms of prevailing provisions of the Act.- Decided in favour of assessee for statistical purposes. Addition made on adhoc basis - Assessee incurred expenses under different heads - HELD THAT - As during the course of assessment proceedings, the AO noticed that the assessee has incurred expenses under different heads i.e. packing materials, miscellaneous expenses and printing and statutory expenses but the assessee was failed to furnish the documentary evidence in support of his claim but these are the incidental expenses to be incurred by the assessee considering to the nature of business of the assessee but for want of production of desired evidence of expenses, the AO has rightly disallowed 10% of the total expenditure incurred which has been upheld by the CIT(A) also. If the assessee was unable to produce the required document before the AO, he had an opportunity to produce the same in support of his claim of expenses debited into the profit and loss account under the aforesaid heads before the CIT(A) but the assessee could not do so. Therefore, the CIT(A) has rightly upheld the action of AO. No reason to interfere with the observations of the CIT(A) in this regard and we uphold the same. This ground of appeal of the assessee is dismissed. Addition on account of presumptive basis - HELD THAT - AO during the course of assessment proceedings that the assessee has claimed the expenses as allowable expenditure claimed u/s.37(1) of the Act, however, the AO disallowed the same stating that the expenditure claimed by the assessee does not relate to the business of the assessee towards earning of the income as per Section 37(1) of the Act. It is also not an incidental expenses to earn the income of the assessee which rightly been confirmed by the CIT(A). Accordingly, we do not see any reason to interfere with the observations of the CIT(A) in this regard and we uphold the same. This ground of appeal of the assessee is dismissed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI
Issues Involved:
1. Classification of interest income as "income from other sources" versus "business income" and eligibility for deduction under Section 80P(2) of the Income Tax Act. 2. Disallowance of ESI & EPF contributions due to delayed payment. 3. Adhoc disallowance of expenses. 4. Disallowance of income tax expenses. Issue-wise Detailed Analysis: 1. Classification of Interest Income and Deduction under Section 80P(2): The assessee, a cooperative society, claimed that interest earned from fixed deposits should be treated as business income and eligible for deduction under Section 80P(2) of the Income Tax Act. The Assessing Officer (AO) classified this interest as "income from other sources," disallowing the deduction and setting off of carried forward losses. The AO's decision was based on the finding that the interest income was derived from surplus funds parked in fixed deposits, not from business operations. The Tribunal found that it was unclear how much of the fixed deposits constituted surplus funds versus funds earmarked for distribution to eligible recipients. The Tribunal remanded the matter to the AO to determine the source of the fixed deposits and whether they were surplus funds. If the fixed deposits were not from surplus funds but from funds meant for business activities, the AO was directed to allow the deduction under Section 80P(2)(d). 2. Disallowance of ESI & EPF Contributions: The AO disallowed the deduction for ESI and EPF contributions amounting to ?67,720/- because the payments were not made within the due dates specified under the respective Acts. The Tribunal upheld the AO's decision, referencing Section 36(1)(va) and Section 2(24)(x) of the Income Tax Act, which mandate that such contributions must be deposited on or before the due date specified under the relevant Act, not the due date for filing the return. The Tribunal restored the issue to the AO for verification, instructing the AO to examine the dates of actual contributions and grant relief for claims that qualify under the prevailing provisions of the Act. 3. Adhoc Disallowance of Expenses: The AO made an adhoc disallowance of 10% of the expenses claimed under various heads like packing materials, miscellaneous expenses, and printing and stationery, due to the lack of documentary evidence. The CIT(A) upheld this disallowance. The Tribunal agreed with the CIT(A), noting that the assessee had opportunities to provide the necessary documentation both during the assessment proceedings and before the CIT(A) but failed to do so. Therefore, the Tribunal upheld the adhoc disallowance of ?1,13,818/-. 4. Disallowance of Income Tax Expenses: The AO disallowed an amount of ?1,15,770/- claimed as income tax expenses, stating that these were not allowable under Section 37(1) of the Income Tax Act. The CIT(A) confirmed this disallowance. The Tribunal upheld the CIT(A)'s decision, agreeing that the expenses did not relate to the business activities of the assessee and were not incidental to earning the income. Procedural Issue: The Tribunal addressed a procedural delay in pronouncing the order due to the COVID-19 lockdown. Citing the extraordinary circumstances and following judicial precedents, the Tribunal excluded the lockdown period from the 90-day time limit for pronouncing orders. Conclusion: - ITA No.392/CTK/2020: Allowed for statistical purposes. - ITA No.393/CTK/2020: Partly allowed for statistical purposes. Order Pronounced: The order was pronounced in the open court on 05/06/2020.
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